The unemployment figures from the Labor Force Survey for the fourth quarter of 2025 have been released. Everyone is celebrating them as excellent news: unemployment in Spain has fallen below 10%. for the first time in eighteen yearsI reread the news and I wasn't wrong. With all the immigration that has been arriving for years in almost every autonomous community in Spain, the unemployment rate has just fallen below 10%. Data from the previous quarter in other neighboring and comparable economies shows Greece (often the European record holder), 8.2%; Italy, 5.7%; and France, 7.7%. Only South Africa, a world leader for decades, surpasses us among medium-sized/large economies, with 31.9%. In Europe, the Eurozone is at 6.3%; the United Kingdom at 5.1%. In other words, we still have a huge problem with unemployment.
When we review the historical series for the entire country, since 1980, the lowest rate is 7.93% in the second quarter of 2007. Spanish unemployment, however it is measured, has always been anomalous. This can only be attributed to a legal framework that creates distortions which ultimately discourage people from actively entering the labor market. Northern Europeans have always struggled to understand what's happening to us.
The breakdown by autonomous communities is revealing. Andalusia (14.7%), Extremadura (13.4%), the Canary Islands (12.6%), Castilla-La Mancha (12.1%), Murcia (11.1%), and the Valencian Community (10.4%) are all above the national average. This is southern Spain, traditionally poorer and/or the most affected by its reliance on tourism. The lowest unemployment rates are found in Cantabria, Madrid, the Basque Country, Aragon, and the Balearic Islands, ranging from 6.8% to 7.8%. Catalonia (8.2%) falls somewhere in between, with the other autonomous communities having unemployment rates between 8% and 8.4%.
All these rates are higher than could be explained by purely economic factors. To explain them, one must consider regulation, unemployment benefits, policies supporting the less fortunate, and other extraordinary income support mechanisms which, taken together, discourage many potential job seekers from accepting job offers. Meanwhile, a vast number of people (immigrants, but not only) work in the informal economy, off the books. We therefore have a serious problem of equity within the population, especially between the poorest citizens and recent immigrants. There is a conflict between those seeking paid work and those seeking subsidies. Furthermore, there is the opaque world of employment services, where enormous amounts of EU funds intended for retraining the unemployed have been squandered, ultimately resulting in high unemployment rates that never actually decrease.
The 2012 labor market reform aimed to eliminate the rigidities of the 1980 Workers' Statute, which had necessitated numerous reforms to the range of employment contracts. This reform went much further, allowing for an unlimited proliferation of employment contracts, always with a downward trend. Recent reforms have legitimized fixed-term intermittent contracts, which are primarily a consequence of the specialization in tourism. Our production model is now heavily influenced by the specialization of the Spanish economy in low-wage, highly flexible contracts for employers. This context overlaps with the inability to reduce the unemployment rate below levels that, by international standards, are exceptionally high. The only possible explanation is that there are many benefit recipients who are not interested in working and who are neither penalized nor incentivized to work even when they receive suitable offers. Of course, if the diagnosis is correct, we are facing a massive waste of public resources, and if the map is the one deduced from unemployment rates, it is a significant contributor to the sharp differences in the fiscal balances of the autonomous communities (favorable for some and unfavorable for others).
These phenomena cannot be separated from purchasing power parity (PPP). Spain's obsession with equality comes to a screeching halt when faced with differences in purchasing power parity, which have a direct impact on well-known and accepted data, such as the differences in average salaries by province. The concept, which all civil servants in state agencies (or Renfe employees) know perfectly well—and which leads them to flee from a posting to Catalonia and aspire to postings where their purchasing power increases, or to Madrid, always desirable for promotion—is prohibited. Right now, any reforms to the regional financing model are largely irrelevant if purchasing power parity differentials are not taken into account. Nominal equality (at current prices) has nothing to do with real equality (adjusted for PPP). Incidentally, this is the necessary adjustment to the financing model: not based on population adjustments, but adjusted for PPP.
